Stock market price action anticipates break higher

Price action and setup analysis

If sentiment just before an event is contrary… then Thursday’s restrained optimism suggests the market is eager to break sharply higher. Its post-close surge was temporary, but illustrated the pent-up buying pressure. The trick now is in greeting the report from within or above Thursday afternoon’s range.

Pattern points… (Setups and technicals)

Thursday morning’s optimistic surge was barely retraced intraday. That wasn’t due to “ineffectual optimism” spinning its wheels just to stay in place. It was more of a restrained optimism, even pessimism — pessimism atop a 26-1./2 point rally from overnight lows.

Weak-handed buyers never probed fresh highs intraday that would have exposed them to being rejected, and trapped. Meanwhile, anxiousness ahead of Friday’s Employment Situation report failed to produce more than a temporary last-hour dip. That’s strength, Gary Cooper style.

That strength assumes the report will not be greeted from under Thursday afternoon’s 1419.00 lows.Thursday’s post-close surge up to 1425.00 apparently assumed that, as well.

What’s Next… (Outlook and opportunities)

Speaking of 1425.00, we’re not yet out of the woods, there being one more “higher prior low” of significance above at 1425.25. Its recovery would target 1431.00-1433.00. This being a Friday with the illiquid weekend fast- approaching, and the second day of a breakout, and 8-9 point rally seems weak. Rallying at all could be big — to 1443.00 or 1450.00 — if at all. Back under 1419.00 could target new lows under 1400.00.

Look for at least one update overnight or ahead of the Morning Market Tour… My thoughts on the day’s econ calendar are linked here.

About the Author

Rod David develops analytical techniques that are designed to efficiently identify targets and turning points for any liquid stock or market in any time frame. He primarily analyzes S&Ps, generating several round-turn candidates daily. Rod publishes "Trading Plan" and more each session at the blog http://IfThenSignals.com.